Tue, 15 Aug 2000

Shareholders' meeting to decide KPC's future

JAKARTA (JP): The shareholders of coal mining company PT Kaltim Prima Coal in East Kalimantan will meet here to decide on the company's future, following failed efforts to end a dispute with striking workers.

KPC representative for Jakarta, Bambang Susanto said on Monday representatives of KPC's shareholders Anglo-Australian mining company Rio Tinto and the British-American oil and gas company Beyond Petroleum (BP) would hold a two-day meeting from Tuesday (today).

"Tomorrow's discussion will likely cover every aspect of this problem, including the possibility of KPC pulling out from Indonesia," Bambang told The Jakarta Post.

He said the meeting was part of the company's regular shareholders meeting, which is held at least twice a year, to discuss the company's performance.

The giant coal mining company has shut down its coal mine in Sangatta since Aug. 2, after the company's striking workers re- established a blockade on the company's production facilities following a deadlock in negotiations.

The strike, which started in mid June, has forced the company to stop operations three times, incurring losses amounting to US$1.65 million.

Bambang said KPC's board of commissioners would also attend the upcoming meeting.

He said the shareholders had probably made an assessment of every possible step they could take in response to the mine blockade.

He said there was a consideration of temporarily laying off several staff members while mining operations remained at a standstill.

The meeting would also consider declaring force majeure to the contract of work signed with the government, he said.

He said that under the force majeure, KPC would be exempted from contractual obligations of paying taxes, royalties and other rents to the government.

"The force majeure simply means that KPC will not be able to pay its full obligation to the government," he explained.

KPC has said earlier that the closure of its coal mine had cost the government Rp 82 billion (US$9.8 million) in potential royalties and corporate taxes.

But Bambang said that since no force majeure had been declared on the contract with the government, KPC remained liable to fully pay its financial obligations to the government.

Under the force majeure clause of its contract of work, Bambang said, the company is allowed to extend the life of its contract to compensate for the force majeuer period.

KPC's contract expires in 2022.

The company declared force majeure for the second time to its customers last week following its failure to load arriving ships with coal due to the blockade by the striking workers.

The force majeure status prevents the company from being charged with penalties because of a breach in its sales contract.

KPC mainly ships its coal to Japan, South Korea and Taiwan, but it also sends lower volumes of coal to Germany, Italy, Portugal and the United States.

He said thus far there were no signs as to when negotiations between the company and the striking workers could resume.

He said KPC stood by its condition that it would not begin any negotiations while the blockade remained.

"So it all depends on them (the workers)," he added.

The workers have demanded pay hikes and the reinstallment of daily allowances.

KPC has agreed to meet the demands but insisted on taking disciplinary measures on the striking workers. This was flatly rejected by the striking workers. (bkm)